Do you remember the days when you would go to the doctors and they would have to move around massive shelves to find your file folder and medical history? Well, despite these documents being made electronic in recent years, the accessibility of these documents still looks much like the day of big, old shelves stuffed to the brim with paper file folders.

Unfortunately the way systems are currently set up, communication of healthcare records is rather spotty. Not only are medical records not readily accessible to patients and doctors, but data breaches lead to over $6 billion in damages every year. Put simply, doctors and patients currently have poor access to their records, yet hackers have pretty decent access. Something needs to give and that’s where the Blockchain solution, Medchain comes into play.

Funding Round Details

MedChain logo
Company: MedChain
Security Type: Equity - Common
Valuation: $20,000,000
Min Investment: $500
Platform: StartEngine
Deadline: Apr 30, 2018
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Check out my discussion with Joachim Sandgaard below and learn more about what he and his team are up to...

Joachim, you have spent the bulk of your career in the medical device space. So why MedChain and why now?

The genesis of the MedChain starts with coming to the United States from Denmark at the age of 14; my father is an entrepreneur who in 1996 created a ‘durable medical equipment’ company. I started out soldering circuit boards for this medical device company, and over time I worked my way up to System Administration and Sr. IT Management working under the CFO. During my time at this company, I spent 6 or 7 years working with paper-based electronic medical records as we transferred to electronic medical records.

It was a terrific learning experience because I came to see the issues of interoperability between medical system records. I remember spending hours, days, and even weeks inputting information from one system to the other.

In 2013, I learned about bitcoin, the blockchain and invested in some cryptocurrencies while exploring exciting new ideas in the space. In 2015, I came upon Ethereum, and became intrigued by the concept of executable code directly on a blockchain. It became apparent to me that the blockchain could be a great supplement for a SaaS database for EMR.

Despite that opportunistic thought, what are some of the challenges with trying to execute on this vision?

HIPAA rules and regulations don’t allow for ‘mathematically derived pseudonyms’ as the way to ‘de-identify’ publicly identifiable information. We determined that we needed a distributed storage network built off-chain, while utilizing a public blockchain that was transparent, where access controls were clearly delegated, and where data points were agreed upon.

For those that don't know how do you define MedChain as a business?

MedChain is a company leveraging blockchain technology to approach the problem of interoperability as it relates to electronic medical records (EMR). What you may not realize is that from a cost perspective data breaches cost healthcare facilities $6.2B a year. If we can get away from systems that silo data, we can eliminate a large risk factor and in doing so minimize the $6.2B spent on data breaches; a cost usually passed on to patients.

Can you talk about current EMR shortcomings and how MedChain improves on the current system?

The biggest shortcoming is the data silos that exist because many healthcare systems have their own set of structured data. What that means is that at any one time, 100’s of thousands of patients can lose the security of their health information with a single data breach.

At MedChain, we are creating a system where data is localized to a single user, but never localized on a single server. If there was ever to be a data breach, only one individual would lose the security of their data. The chances of a widespread breach of the database become extremely slim because there is no master database or password to access it, which is much more secure than what currently exist.

What are the benefits of a blockchain powered EMR for patients?

For patients, it’s all about having their records where they need to be, when they need them most. Be it calling a new insurance agency, or showing up at a hospital in the event of an emergency, all of your data will follow you instantaneously.

There will be no more waiting for your records to be faxed to the hospital to find out your allergic to certain antibiotics. It all goes back to solving the issue of interoperability in electronic medical records. Now we can make sure your data follows you to where it needs to be.

The healthcare industry can be averse to change. How do you drive adoption of MedChain and when do you think we would begin to see it in commercial use?

The plan is to deploy our FHIR HL7 interoperable product beta in 9-12 months. At that point we will approach labs, pharmacies and primary care physicians (PCPs) doing medication registry to create an initial interoperability solution for managing medication subscriptions.

Think of this as our minimal viable product for doctors. If we can obtain the quick integrations we think we can achieve, then we can lean on our network of 250 sales reps related to our co-founder’s company. This is a very rudimentary way we can leverage our connections for quick scaling growth during the early days of deployment of our software. We are confident that if we move through our regulatory checks successfully, that we will be able to have our technology adopted relatively quickly by medical organizations. Our end user don’t even need to know about the blockchain or cryptocurrency.

The blockchain for us, is really just the tech behind creating an integrated medical record system. Anyone licensing our SaaS software would never need to understand the technology behind it to use it.

What are the challenges of being a blockchain based medical record system while also meeting HIPAA compliance?

One of the scariest aspects is that there are a lot of black hat and white hat hackers that might have an interest in infiltrating a system like ours. Companies like Cerner or Epic have billions to spend of system defenses, making them able to weather the storm of breaches.

We are at the mercy of people who are interested in messing with something just for the sake of it. All the excitement could also bring negative attention and make people weary of it. The rules and regulations of HIPAA and Fintech that outline what we can and can’t do are very concrete and certain.

To our best ability, I don’t think we will have foreseeable problems in situations of breachings or non-compliance. There are ways we could meet and exceed all necessary guidelines; we just need the foresight to prepare beforehand.

In recent months there have been a lot of concerns about security on the blockchain. How do you ensure that people's records are totally safe on the blockchain?

That’s another aspect of compliance. Anyone storing data as part of the storage network will also need to meet HIPAA compliance as it relates to data storage. They will need to prove to us that they are as safe as they can be from a breach.

The benefit of the blockchain is that even if they decrypt our blockchain, no patient information is actually stored on the blockchain. Essentially, we have thousands of clouds with not one single cloud holding all the info necessary to recreate a single file. It requires the blockchain to reference them in order to download and decrypt the files. It’s like adding 3 layers of security onto a traditional cloud system.

What benefits do patients get from controlling their own healthcare records?

An individual’s ability to control the ownership of his or her own records may seem like a scary concept. But, in reality, if people are allowed to have firearms or drive cars, so why should they not have control of their medical records? If you want to give someone access to your health records, the net benefit is that it’s your information.

These records should not be locked up in some silo somewhere or controlled by a physician who passed away and can no longer transfer your records. The net benefit is that this information is always available to you, and you can decide who receives your information and what particular information they get. It really removes control from insurance or care providers that store that info and are then able to designate who gets it and when. It’s on you.

If some organizations decide to adopt MedChain, but others do not, how will that work for a patient that moves outside of your system?

We plan on having our web app available so that a user can log in and then download, print, or make their info available to care providers — even if the care provider decides not to use a solution we are offering.

If a provider decided not to use our solution, that will be net loss for them, but if we never make that record available to patients to control by themselves, then they would be isolating themselves from interoperability as a whole.

If companies like Cerner or Epic were to go that route, that could present a problem that users would hopefully take enough issue with to a point that Cerner or Epic would have to find a similar blockchain solution that can work with ours.

What is the monetization strategy of MedChain as we look forward?

We plan to roll out a licensing service where we license our API and use of our blockchain, which has segregated access based on your license. For example, a solution for monitoring current prescriptions for patients will be one license type. We also plan to have a traditional SaaS model, where we create our own EMR system down the road and facilities pay to use it.

Can you talk more about your decision to pursue a raise via StartEngine rather than a completely open ICO?

There are a couple reasons we decided to work with StartEngine. They were the first SEC registered funding portal to allow for the sale of anything related to cryptocurrencies. They were first to say that they want to offer a platform for people who want to do it the right way.

We are trying to be very cautious about how the SEC might look at these offerings in the future. We wanted to make sure we were on the right side of the law the whole time and that we are prepared to go through all the right steps proving we are a legitimate company out of Colorado. We will have to file all our financials; what we are doing with the money, how we are spending it, and that the money is not just disappearing to some bank in another country.

We are very legitimate and trying to do this the right and regulated way by prioritizing security and legality.

What do you plan to use the capital raised for on StartEngine, and how much of the funds do you think will be required to build out the technology you need to successfully roll out?

A large part of the capital from this regulation CF is going towards ensuring that the software is ready for deployment in 9-12 months and to fund marketing leading into our Reg D, followed by our Reg A+ ICO, especially since this requires a lot of funding.

Right now the majority is being spent on high-end, qualified people to build out our technology. For instance, we just brought on a terrific CTO to help build the architecture and deploy our network and blockchain while we continue to prove out our technology.

The ability of the blockchain to put the patient in control of their information, and the ability to thwart data breach attacks makes this an intriguing offering. The need for interoperability of medical records to improve patient care is much needed in the US and will likely have greater implications on improving healthcare outcomes.

The MedChain team is well experienced in the medical space. It will be interesting to see if they can drive adoption in an industry that can at times be resistant to change.

If they can, MedChain will be poised to play an important role in the future of healthcare.